Question
In: Finance
Consider a bond with a coupon of 4.6 percent, five years to maturity, and a current...
Consider a bond with a coupon of 4.6 percent, five years to maturity, and a current price of $1,046.10. Suppose the yield on the bond suddenly increases by 2 percent.
a. Use duration to estimate the new price of the bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Calculate the new bond price using the usual bond pricing formula. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solutions
Expert Solution
a. Use duration to estimate the new price of the bond
a. Using duration, the new price of the bond is estimated at $953.39
Workings:
b. Calculate the new bond price using the usual bond pricing formula
b. The new bond price using the usual bond pricing formula = $958.38
Workings:
jeff jeffy answered 2 years agoRelated Solutions
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maturity, and a current price of $1,039.10. Suppose the yield on
the bond suddenly increases by 2 percent.
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the bond. (Do not round intermediate calculations. Round
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b. Calculate the new bond price using the usual
bond pricing formula. (Do not round intermediate
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the bond suddenly increases by 2 percent.
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the bond. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
b. Calculate the new bond price using the usual
bond pricing formula. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
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